What is a startup?
A "startup" is typically a small, nascent company with a focus on rapid growth, meaning 50-100 times growth in a year. For those who work in such a hypergrowth environment, it can be an exciting, challenging, and fast-paced experience.
In this guide, we will use a broader definition of "startup" that includes larger companies of up to 1000 employees. While these startups may still experience substantial growth, typically in the range of 10-20 times annually, they often operate more like a mature company with well-established job functions, experienced managers, and more predictable work hours. In some cases, they may even offer compensation similar to well-known tech giants.
How do startups develop their products?
To create successful startups, we advise founders to create products that solve problems people actually have, ideally their own problems. Take Airbnb founders, for example, who started their business to make money renting out their apartment. The first step is building a minimum viable product (MVP), which they can share with potential customers to gather feedback. Sometimes, multiple iterations are necessary to achieve success, while other times, a fresh start with a new idea is the way to go.
Reaching product-market fit is a critical moment in a startup's life, marked by a surge in user engagement and customer demand. The company then shifts focus to scaling up and expanding rapidly. Ultimately, it all starts with identifying a need and creating something to meet it.
What is the key to the success of any startup?
Startups in their early stages often don't generate revenue, especially if they haven't found a product-market fit yet. However, this doesn't mean they're doomed to fail, as they can still operate with the funds they've raised for a few years. It's important for these companies to test out their business model early on to determine how they'll eventually make money, whether it's through selling to businesses or consumers, monetizing a marketplace, or selling ad placements. Even if a startup isn't making money yet, having a viable business model can help them secure additional funding from investors who want to see a clear path towards profitability.
In some cases, startups may need to reach a certain level of scale before they can monetize effectively, as advertisers may not be willing to invest until there's enough traffic on the platform. Ultimately, having a solid business model in place is key to the success of any startup.
How much risk it involves to work in a startup?
Joining a startup, especially a pre-revenue one, is riskier than working at a large tech company like Facebook or Amazon. However, not all startups are equally risky. Later-stage startups that have raised significant amounts of money can offer a strong salary and upside on equity, and some startups find profitability early on.
Most early-stage startups raise money to fund product development and do not generate significant revenue. Founders need to manage their money carefully by constantly monitoring their burn rate and runway. When considering a startup, you should ask about these metrics to understand the health of the business before joining.
Your personal risk profile should factor into your decision of which startup to join. If you have a high tolerance for risk, then an early-stage startup might be a good fit, but if you tend to be more risk- averse, you may want to focus on joining a later-stage startup.